Call for health plan subsidies to go

23rd April 2012

A government auditing body in the United States has called on the administration of President Barack Obama to cancel controversial subsidies to the Medicare health insurance programme, saying that the money is being used to fund mediocre care plans.

In what political analysts are calling a slap on the wrist for the administration, the Government Accountability Office (GAO) released a report on Monday which calls for the cancellation of the US$8 billion in "bonuses."

Republicans in Congress have already hit out at the bonus plan as a "political ploy." The GAO is a non-partisan body.

Obama's administration earmarked a total of $8.3 billion for bonuses to be awarded to insurance plans in the Medicare Advantage category, which offers affordable health care to the elderly. The bonuses were to have been awarded for plans that delivered a high quality of care.

But the GAO report says that much of the money has been siphoned off to subsidised coverage plans with only an "average" rating.

The bonuses had been introduced as a transitional arrangement which would ease the way for Medicare policy holders ahead of cuts to the plans under Obama's new healthcare legislation.

But officials said that the Medicare plans would have little incentive to improve quality without the bonuses in place.

According to Republican Senator Orrin Hatch, the bonuses amount to an abuse of official power, and were politically motivated.

There are more than 3,000 private Medicare Advantage plans that serve nearly 12 million policy-holders, all of whom are elderly.

Beneficiaries can expect some limitations on their treatment options, but pay lower premiums.

Prior to Obama's new law, providers had been able to take home fat profits from overpayments.

Medicare Advantage has become a political hot topic ahead of presidential elections later this year. Seniors usually include the highest proportion of swing voters of any demographic group.

The Obama administration then said it would test run the bonus plan to see if it led to appreciable improvements in care provision for the elderly.

The GAO said the programme was highly unusual and was far larger than any undertaken in recent decades.

But it said that most of the money was going to 3 1/2 star plans instead of to five-star plans.

The bonus scheme will stay in place until 2014 and was intended to soften the blow of Medicare Advantage cuts.

The GAO said that the design of the demonstration made a credible evaluation of its effectiveness impossible.

But officials at the Health and Human Services Department insisted that the bonuses will improve the quality of care, saying that companies providing such plans would lack any incentive to improve care to those enrolled on Medicare Advantage in the absence of the bonus plan.